Egypt using price increase to cool energy use

Officials in Cairo hope increases in household electricity prices will take some pressure off national power grid this summer, amid mounting concerns over Egypt's ability to import enough fuel to meet energy needs.

Egypt is expected to experience numerous power[2] cuts this summer due to ongoing shortages of fuel, including natural gas and the low-quality diesel fuel mazut.

Over recent weeks, several news reports have claimed that Egyptians might see blackouts twice a day due to a Ministry of Electricity[3] plan to conserve electricity during the hottest months from May to August.

Hoping for a mild summer:

Speaking to Ahram Online, Hafez El-Salmawi, head of the Egyptian Electric Utility and Consumer Protection Regulatory Agency, said that the coming summer might not be as bad as expected, and may even be better than last year in terms of electricity[4] service.

He said that Egyptian households might not suffer frequent power outages, as the government had raised household electricity prices to reduce consumption.

"Egyptians will try to save electricity to avoid paying higher bills, especially after prices[5] were raised for the first time since 2008," El-Salmawi said.

Egypt's government has recently moved to reduce subsidies on electricity and natural gas, which account for as much as 5 percent of the country's total LE145 billion subsidy bill.

Prices for consumers increase with consumption, with tariffs on monthly consumption of up to 200 kilowatts per hour increasing by 4.4 percent to LE0.12. Taking into account a previous increase, prices have risen by ten percent since November of last year.

The other two highest consumption categories saw an increase of more than 17 percent each.

El-Salmawi said that electricity consumption during the summer was expected to rise to 29,500 megawatts per day, exacerbated by the hot weather and the Islamic holy month of Ramadan in July. Egypt's daily capacity for generating electricity currently stands at around 27,000 megawatts.

"The national electricity grid will be overloaded by around 2,500 megawatts on rush days and on days that see heat waves, which should be dealt with through household conservation," El-Salmawi stated. "Otherwise, the government will have to cut power during these overloaded days in some areas."

El-Salmawi said that, if every consumer turned off one 40-watt light bulb, for example, about 1,500 megawatts could be saved.

Over the last ten years, electricity consumption has jumped by 29.5 percent, according to official data, with prices largely static until the recent hikes.

Abu El-Ela explained that power stations consume either natural gas[6] or low-quality diesel fuel. With Egypt's current fuel shortage, he added, a number of power plants have seen their supplies disrupted, shrinking their capacity and leading to repeated power failures in some areas.

Egypt is completely dependent on fossil fuels for producing electricity, with a mere ten percent of the country's total generated electricity coming from wind turbines and hydroelectric plants, such as the Aswan High Dam, Naga Hammadi's barrages and the Aswan reservoir.

While the 2,500 megawatts represent an overload on the electricity grid, the power-generating gap is likely to be larger depending on the availability of fuel.

Electricity Minister Ahmed Emam said on Sunday that the country's power-generating gap during the summer would be revealed by the end of the current month, after the amounts of fuel to be supplied by the petroleum ministry are announced.

"The problem is related to the Ministry of Petroleum[7], which should save fuel quantities for electricity power plants," Abu El-Ela said.

El-Salmaw, for his part, asserted: "The cash-strapped government faces trouble obtaining fuel imports. Also, the Ministry of Petroleum owes foreign oil companies around $6 billion, which have halted a part of the oil supply until the ministry pays up."

Electricity troubles are not new to Egypt, but the problem has been exacerbated in recent years.

Under the former regime, Egypt's government had enough foreign currency liquidity to pay for fuel imports, and it had the trust of suppliers due to its sizable net international reserves (NIR), Mohamed Abu Basha, an economist at Egypt's largest investment bank EFG-Hermes, told Ahram Online.

"The current situation is different; the government faces a vast shortfall in foreign currency, along with its haemorrhaging NIR and political turmoil, so a negative impact on fuel imports is expected," Abu Basha commented.

Around 60 percent of domestic natural gas consumption was allotted to electricity generation, compared to only 56 percent in 2011.

Egypt produced 45.8 million tonnes of natural gas in 2012, a 0.85 percent drop from the previous year's 46.1 million tonnes, the state-run Information and Decision Support Centre (IDSC) has reported. Egypt is signatory to a number of gas-export agreements[8], and production has not yet reached the levels required to meet domestic consumption needs as well.

In March, Iraq announced plans to sell 4 million barrels of crude oil to Egypt beginning in April.